Three weeks after Apple was declared responsible for leading a conspiracy to raise e-book prices, the Department of Justice (DOJ) today submitted a proposed remedy to prevent the company from fixing prices and discriminating against competitors such as Amazon and Barnes & Noble.

Apple should not be able to "discriminate against rival e-books apps and may not agree with any other e-book retailer to fix retail e-book prices," the proposal (PDF) says. The specific remedies would, among other things, make it easier for iPhone and iPad users to buy books for use on Amazon's Kindle and Barnes & Noble's Nook apps.

Those apps don't include a way for users to purchase books today, largely because if they did, Apple would demand a 30 percent cut on sales. Amazon and Barnes & Noble apps aren't even allowed to provide links to purchase pages unless they also make the books available as in-app purchases, with Apple getting that 30 percent cut.

Users of the Kindle and Nook iOS apps can exit the app, open the device's Web browser, navigate to Amazon's or Barnes & Noble's website, purchase books, and then go back into the Kindle or Nook app and download them. But a direct connection between the apps and purchasing mechanisms does not exist today.

That would change under the proposal from the DOJ and 33 state attorneys general:

[The proposal] requires Apple, for two years, to permit any e-book retailer to include in its e-book app a hyperlink to its own e-bookstore, without paying any fee or commission to Apple. This section thus requires Apple, for a relatively brief period of time, to return to its own pre-iBookstore policy of allowing Amazon, Barnes & Noble, and other e-book app providers to offer a simple, costless means for readers to purchase e-books directly from the third party.

This provision is intended to reset competition among trade e-book retailers and deny Apple the benefits of its conspiracy. In 2011, shortly after adding Random House’s titles to the iBookstore, Apple forced its retailer rivals to remove the hyperlinks from their e-book apps (in order to avoid paying Apple a 30 percent commission on their sales). By doing so, Apple made it more difficult for consumers using Apple devices to compare e-book prices among different retailers, and for consumers to purchase e-books from other retailers on Apple’s devices. At the time, as a result of Apple’s collusive agreements, prices for the most popular e-books tended to be the same across retailers, and many consumers likely determined that shopping around for a better e-book price was a waste of time.

The DOJ proposal would also bar Apple "from entering into contracts that would, in any way, fix the price that any of its competitors charge for content." Apple would not be able to share information with publishers in attempts to take "collective action" that raises prices across the board. The proposed judgment would remain in effect for 10 years, but certain requirements will not last that long.

Apple would have to terminate the agency agreements with publishers that were crucial in the conspiracy. "Apple also is barred, for five years, from either enforcing its retail price MFNs [most favored nation contracts] against publishers or accepting limitations on its own ability to price-compete with respect to e-books," the DOJ's proposal states.

Finally, Apple would have to hire a full-time, internal antitrust compliance officer to make sure the company plays by the rules. "The PFJ [proposed final judgement] also calls for an External Compliance Monitor, appointed by this Court, with the authority to oversee Apple’s compliance with the PFJ, and to oversee Apple’s internal antitrust compliance provisions," the DOJ wrote. "Apple also will be required to provide to the United States and the Representative Plaintiff States reasonable access to Apple’s documents, information, and personnel."

No financial penalties against Apple are being proposed, but the DOJ said these remedies combined with requirements for publishers will be enough.

"Price competition has returned to the marketplace" because of previous settlements with the publishers accused of conspiring with Apple, the DOJ filing states. Penguin, HarperCollins, Hachette, Simon & Schuster, and Macmillan have agreed to repay $164 million to consumers who were overcharged. The publishers also were "required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and to allow for retail price competition in renegotiated e-book distribution agreements," a DOJ announcement said.

UPDATE: Apple has filed a response in court, saying the "overreaching proposal would establish a vague new compliance regime—applicable only to Apple—with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process."

The harms from the conspiracy were "already remedied by the publishers' consent decrees," Apple wrote. The restrictions placed on Apple's treatment of e-book apps is also unwarranted because "there was no evidence admitted at trial, or finding by the Court, that the conspiracy involved the App Store," Apple wrote.

Further, Apple contended that the DOJ proposal unfairly targets more than just books.

"Plaintiffs would prohibit Apple from entering into or maintaining 'any agreement with any E-book Publisher or supplier of any other form of content (e.g., music, other audio, movies, television shows, or apps) where such agreement likely will increase, fix, or set the price at which other E-book Retailers or retailers of other forms of content can acquire or sell E-books or other forms of content' for the entire ten-year period of the judgment," Apple wrote. "This absurdly broad proposal is not only disconnected from any evidence adduced at trial or findings made by this Court, but would open Apple up to liability in virtually every content market for the actions of content producers, over which it has no control."

I'm really curious as to how far this will go. The pricing fixing is fair enough, I like the ruling, but the 30% take applies to more than just books, there are a whole lot of companies offering subscriptions that are unhappy about that one.

"This provision is intended to reset competition among trade e-book retailers and deny Apple the benefits of its conspiracy."

How can competition be "reset" if Amazon is selling below cost?

Looks like every idiot in government is now on the bash Apple bandwagon.

Amazon is selling ebooks at below costs?

Yes- that's a well known portion of the case: Amazon would sell the books for less than what they paid the publishers for them.

It would be nice if they did also investigate Amazon's predatory pricing, since they had enough other things to make selling ebooks below cost feasible, and cornering the market (leading to this Apple conspiracy since nobody could make headway against Amazon).

Maybe I didn't pay enough attention. I didn't notice a lot of pricing difference between Apple and Amazon. But I preferred the Kindle app on my iPad. Loads considerably faster. I use it consistently. It'll be handy to buy books there instead of negotiating through the website. I only wonder about how they'll lay into making *other* purchases from Amazon via Kindle.

It would be nice if they did also investigate Amazon's predatory pricing, since they had enough other things to make selling ebooks below cost feasible, and cornering the market (leading to this Apple conspiracy since nobody could make headway against Amazon).

Amazon was investigated by the DoJ and they found that Amazon ebook division has been profitable since day one so no, no predatory pricing for them

[The proposal] requires Apple, for two years, to permit any e-book retailer to include in its e-book app a hyperlink to its own e-bookstore, without paying any fee or commission to Apple.

By far the most significant element, and one that will provide a direct benefit to those using the iOS ecosystem. It undercuts Apple's position as the channel through which all content flows, though, so expect them to whine a lot.

America, it seems, is now turning into a country that mocks, punishes and destroys its successful companies instead of praising, rewarding and encouraging them as we did in the past. America is turning into the UK. Sad.

If said company is successful through bullying, lying, cheating, and stealing, well then I'm ok with this response.

"This provision is intended to reset competition among trade e-book retailers and deny Apple the benefits of its conspiracy."

How can competition be "reset" if Amazon is selling below cost?

Looks like every idiot in government is now on the bash Apple bandwagon.

Amazon is selling ebooks at below costs?

Yes- that's a well known portion of the case: Amazon would sell the books for less than what they paid the publishers for them.

It would be nice if they did also investigate Amazon's predatory pricing, since they had enough other things to make selling ebooks below cost feasible, and cornering the market (leading to this Apple conspiracy since nobody could make headway against Amazon).

What are you talking about - Amazon purchased ebooks at wholesale rates that where typically 20-40% below retail (paper back) - so somewhere between $4-$6, then then sold many for 9.99. It was really only until Apple got in the game that the publishers forced amazon to accept new contracts that then raised the cost of the ebooks, and made it impossible for amazon to continue selling their books at their price of choosing.

If you have ever walked into a bookstore you would know that many MANY books are sold below retail price, and this is common practice - especially in cases where items are purchased at wholesale rates.

Apple could not compete with Amazon using the wholesale model because they would not be able to:a) achieve their 30% takeb) receive as competitive pricing as Amazon (remember amazon had/has a lot of pull with publishers because of their volume for both ebooks and physical books), mainly due to volume.

Remember this entire thing STARTED with the investigation of Amazons practices, and then during that investigation it was discovered that Apple/publishers where the ones causing the issues in the ebook market.

About the predatory pricing—the DOJ agreements with each of the publishers mean the publishers have to allow Amazon and any other company to price individual ebooks below cost. However, the total revenue of all ebooks from that company on that vendor are not allowed to be below cost.

So while Amazon can price a bestseller at any price they choose, if it's lower than 70% of the suggested retail price (and 70% of SRP is now effectively the wholesale price), Amazon is required to make up any losses by making enough money on other books from that same publisher to cover it. The same goes for B&N and Apple.

It would be nice if they did also investigate Amazon's predatory pricing, since they had enough other things to make selling ebooks below cost feasible, and cornering the market (leading to this Apple conspiracy since nobody could make headway against Amazon).

Amazon was investigated by the DoJ and they found that Amazon ebook division has been profitable since day one so no, no predatory pricing for them

I don't think you understand the concept of predatory pricing. When you're the 800 pound gorilla in a market, you can engage in predatory pricing and still make money. In fact, that's pretty much the point.

Perhaps the one not knowing what predatory pricing and loss leader is you.

But apart if I know or not, the fact is that DoJ investigated Amazon and concluded that they were not engaged in predatory pricing

America, it seems, is now turning into a country that mocks, punishes and destroys its successful companies instead of praising, rewarding and encouraging them as we did in the past. America is turning into the UK. Sad.

It wasn't true the first time you said it; repeating it over and over won't make it any more true.

Yes- that's a well known portion of the case: Amazon would sell the books for less than what they paid the publishers for them.

It would be nice if they did also investigate Amazon's predatory pricing, since they had enough other things to make selling ebooks below cost feasible, and cornering the market (leading to this Apple conspiracy since nobody could make headway against Amazon).

Amazon had an agreement with publishers to allow them to sell books at wholesale. Publishers didnt like the options but Amazon refused to allow the books without the prices that allowed for wholesale pricing. Since Amazon was the biggest eBook retailer, the publishers felt it necessary to allow the cost cutting in order for the books to be allowed on Amazons Store. Once Apple got involved, the tables were turned and the publishers had a big enough company to back them in raising the prices and no longer needed to have their books on the Amazon store and forced Amazon into a new model that actually hurt consumers by forcing higher prices on us.

But predatory pricing, while bad for other companies such as B&N and Apple, do not hurt consumers as Apple did with this "Agreement". Apple actually caused the prices to rise more than 150%. For an Electronic book that is nothing more than a text document reproduced millions of times.

Each Bestseller eBook is sold on average for $15.99. If 10,000 people buy said eBook they have made $159,900 for what? One person making the eBook format from the print data. and of that 159K how much was actually given to the Author?

Yes Amazon was undercutting everyone in the eBook market 5 years ago. NYTimes Best sellers were between 6.99 and 9.99. How many consumers did you hear complaining? 0

Apple wanted in the market but couldn't compete with those prices since they dont make enough elsewhere in their business with the $399 iPod touch or the $649 unlocked iPhone. Or how about the $3k Mac Pro that you cant upgrade.

It would be nice if they did also investigate Amazon's predatory pricing, since they had enough other things to make selling ebooks below cost feasible, and cornering the market (leading to this Apple conspiracy since nobody could make headway against Amazon).

Amazon was investigated by the DoJ and they found that Amazon ebook division has been profitable since day one so no, no predatory pricing for them

I don't think you understand the concept of predatory pricing. When you're the 800 pound gorilla in a market, you can engage in predatory pricing and still make money. In fact, that's pretty much the point.

Rather, I think it's you that doesn't understand what predatory pricing is. When a company like Walmart lowers its prices at one store location in order to drive nearby competition out, while subsidizing it from profits from other locations, that's predatory pricing. Once the competition is out of business, they can then raise their prices back to where they're profitable. When a company sells a few of it's products at a loss in order to bring people in to the store, where they'll spend money on other items that give a profit, that's called loss leader pricing.

Amazon was investigated, and the ebook division was found to be profitable, and the books sold below value were loss leaders. Had they been engaging in predatory pricing, amazon would be losing money on ebook sales but subsidizing it with profits from elsewhere (such as kindle sales). Loss leaders are perfectly acceptable, and you see them everywhere- most of the sales at supermarkets are loss leaders, as are game consoles, and a variety of other things.

America, it seems, is now turning into a country that mocks, punishes and destroys its successful companies instead of praising, rewarding and encouraging them as we did in the past. America is turning into the UK. Sad.

It wasn't true the first time you said it; repeating it over and over won't make it any more true.

The sad thing is that there are plenty of people in the USA who do think that repeating the same thing over and over will make a lie the truth. I can tell you the political party they vote for

While true, this is also fairly naive.Amazon is playing a long game which ultimately will hurt consumers pretty badly. Wall Street lets Amazon get away with quarter after quarter, year after year of minimal profits or even losses while keeping Amazon's stock price sky-high because they know exactly what game Amazon is playing.

Amazon keeps its margins razor-thin to decimate the competition, and is doing quite well at that. They are trying to starve out their competition in just about every market imagineable. But once they succeed in a market, Amazon starts to jack its prices up again. You can see this if you track Amazon's pricing trends on sites like CamelCamelCamel.

Amazon is making the same play Walmart did, only this time on a bigger scale. Once Amazon is the only game in town, things aren't quite so pretty.

Excellent! Now let's see them take on the App Store. The notion that Apple should be the single distribution vector for other peoples' intellectual property is odious, anticompetitive, and harms not only developers (30% for WHAT, exactly?) but also the public.

But apart if I know or not, the fact is that DoJ investigated Amazon and concluded that they were not engaged in predatory pricing

No, the DoJ decided not to bring a lawsuit against Amazon for illegal predatory pricing.

No, the DoJ found that the division was profitable.

True, but not terribly relevant, except that apparently it was enough to dissuade the DoJ from taking an antitrust action.

Quote:

By the way, predatory pricing IS ALWAYS illegal. Perhaps the one not knowing what predatory pricing is really you

Not true. In fact, in the US there is no definition of predatory pricing in the statutes and no law against it. It is possible to bring antitrust claims based on predatory pricing practices, but that's not the same thing.

It seems to me that price fixing has already been a boon to one group: self-published authors who are willing to sell their books for under $5. Cheapskate readers like myself got used to $9.99, but when the publishers raised the prices above that, I dropped down into the under $5 market and I am pretty sure I am here to stay. I can get that bestseller next month at a yard sale. Epically dumb move, IMO.

I don't think forcing Apple to allow links to competing bookstores without the 30% cut is fair at all. Would you be OK if Barnes & Noble were forced to give shelf space to Amazon for free, without getting a cut of the sales?

Bad analogy. This case is more like a book seller forcing Barnes & Noble to give them 30% of all profit made on the same shelf as their book. Even that isn't a great one, but is much closer. Apple is making a product that they make huge margins on. After that point a user buying from Amazon costs them nothing, while the shelf space for Barnes & Noble does. Apple is in effect saying that they still own your device that you paid hundreds of dollars for. This isn't some abstract constitutional right they are violating, but it is something that the people have a right to say "No really, you can't do that".